International aid to southern Europe in the early post-war period: The cases of Greece and Italy

Abstract

After the Second World War, both Greece and Italy experienced a Left-Right political polarization and a reproduction of earlier patterns of political patronage. Both Italy and Greece received international aid, including emergency relief, interim loans, and Marshall Plan funds. By the beginning of the 1950s, the Italian economy had recovered better from war destruction and had achieved industrial growth faster than Greece. Italy progressed quite rapidly from stabilization to reconstruction, and then on to development, while Greece progressed with reconstruction, but did not achieve stabilization until after the end of the Marshall Plan. Italy and Greece were obviously different with regard to population and market size, but the outcome of the foreign aid they received, differed in the two countries. This paper suggests that the different outcome is explained by historical legacies and conjunctures, as well as series of institutional, cultural, and political factors. Greece underwent a disastrous Nazi occupation (1941-44) and the destructive Civil War (1946-49) of which Italy was spared. The Italian public sector was endowed with state agencies steering economic development, which the Greek public sector lacked until the early 1950s. Italian elections resulted in more stable governments, led by the Christian Democratic Party, which followed their own policy choices, often deviating from the donors’ policy preference. This was a pattern absent from the long sequence of unstable and internally fragmented Greek governments. The Italian governing elites relied on a social alliance of middle and upper classes, while in Greece the corresponding classes distrusted the government, and resisted government policies. Finally, an economic culture fostering heavy industrialization, in the context of pragmatist liberal economic policies, was present in Italy, but absent in Greece.